Say Goodbye to Offshoring?

[David Farber <dave () farber net>]

Begin forwarded message:

From: Randall <rvh40 () insightbb com>
Date: August 9, 2005 9:57:22 PM EDT
To: JMG <johnmacsgroup () yahoogroups com>
Cc: Dave <dave () farber net>
Subject: Say Goodbye to Offshoring?


http://tinyurl.com/9ph7o

The Googlization Of Enterprise Software - Say Goodbye To Offshoring
Business2 publishes an article by Erick Schonfeld  wherein he says,
on-demand enterprise software is ready to take its next step: Automating
thorny business processes. Excerpts from the article( with minor edits
and my views added.)

As against outsourcing your business processes to offshore
locations,soon enough you'll be outsourcing them to an on-demand
software service instead. At least that's what Net mogul Halsey Minor is
betting on with his personal $50 million On Demand Venture Fund.
Minor, who was at the right place at the right time when he founded CNET
Networksin the mid-1990s, is now a big believer in on-demand software
that is delivered as a subscription service over the Web. Grand Central
is a software-integration service that acts as a central hub for IT
folks who want to connect different enterprise applications together
without paying consultants millions of dollars to do so. Instead they
pay Minor per megabyte of data that runs across Grand Central. Minor is
also an investor in Salesforce.com, which offers customer-relationship
management software as a service over the Web in much the same manner.
What these two enterprise-software businesses have in common is that
their customers incur no up-front costs and pay only for what they use.
Minor likens it to a utility or a railroad, hence his company's name.

While this notion of software delivered as a service is gaining in
popularity, Minor's fund is focused on the next logical step: Web-based
software that automates business processes. A business process can be
anything from the way a company pays its bills to how it approves travel
expenses to the procedures it follows for interacting with suppliers.
Mundane stuff, maybe, but a multibillion-dollar industry of so-called
business-process outsourcing has sprung up over the past few years to
take these rote processes off the hands of corporate managers. These are
tasks like processing insurance claims or expense accounts. Too often,
though, these outsourcers are tempted to throw cheap, foreign labor at
the problem instead of using technology to improve the way the processes
are handled.
Web-based software platforms can change all that. Instead of merely
letting customers tap into some enterprise software over the Web,
startups now have the opportunity to translate specific business rules
into software and automate large swaths of the outsourcing industry. "I
am just waiting for the entrepreneurs," Minor says. He has three rules
for considering a business pitch:

- The startup must aim to make companies or industries more efficient by
automating a business process,
- The software must work using Grand Central, and
- The would-be founders must build a functioning prototype. (If Minor
doesn't like your plan, one could try Emergence Capital Partners,
another venture firm looking to invest $125 million in this area.)

The resulting businesses, Minor believes, will lead to "the Googlization
of enterprise software." He means that, just as Google only gets paid
per click for ads that appear on its website, business-process software
customers should only have to pay for each successful transaction. "Pay
per success," he says, "lines up exactly with the way businesses want to
buy. If I pick up the phone and the call doesn't go through, I don't
pay. If the plane does not leave, I don't pay." Why should enterprise
software or outsourcing services be any different? Software-based
outsourcing services could be built for any noncore business process in
practically any industry. (Consider the possibilities in accounting,
human resources, legal documentation, and procurement, to name a few.)
Anyone who has expertise in a widely applicable business process should
be translating it into Web-accessible software and beating down Minor's
door with business plan in hand. Outsourcing to India or China won't
stop.
        But ultimately, technology arbitrage will trump labor arbitrage
. And the days of throwing bodies at these problems, when bits can
handle them much more effectively, will go the way of the abacus.
--  
"We've got the hatemongers who literally hate this president, and that
is so wrong. . . . The people who hate George Bush hate him because he's
a follower of Jesus Christ, unashamedly says so and applies his faith in
his day-to-day operations." -- Rev. Jerry Falwell, on C-SPAN's  
"Washington Journal"



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